Correlation Between Kroger and Aston Martin

Can any of the company-specific risk be diversified away by investing in both Kroger and Aston Martin at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Kroger and Aston Martin into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Kroger Company and Aston Martin Lagonda, you can compare the effects of market volatilities on Kroger and Aston Martin and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Kroger with a short position of Aston Martin. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kroger and Aston Martin.

Diversification Opportunities for Kroger and Aston Martin

-0.54

Correlation Coefficient

Kroger  Aston Martin

Excellent diversification

The 3 months correlation between Kroger and Aston is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Kroger Company and Aston Martin Lagonda in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aston Martin Lagonda and Kroger is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Kroger Company are associated (or correlated) with Aston Martin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aston Martin Lagonda has no effect on the direction of Kroger i.e., Kroger and Aston Martin go up and down completely randomly.

Pair Corralation between Kroger and Aston Martin

Allowing for the 90-day total investment horizon Kroger Company is expected to generate 0.2 times more return on investment than Aston Martin. However, Kroger Company is 4.92 times less risky than Aston Martin. It trades about -0.12 of its potential returns per unit of risk. Aston Martin Lagonda is currently generating about -0.05 per unit of risk. If you would invest  5,699  in Kroger Company on January 30, 2024 and sell it today you would lose (191.00) from holding Kroger Company or give up 3.35% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.45%
Values	Daily Returns

Kroger Company  vs.  Aston Martin Lagonda

Kroger Company

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Kroger Company are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Even with relatively uncertain basic indicators, Kroger reported solid returns over the last few months and may actually be approaching a breakup point.

Aston Martin Lagonda

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aston Martin Lagonda has generated negative risk-adjusted returns adding no value to investors with long positions. Despite abnormal performance in the last few months, the Stock's fundamental indicators remain nearly stable which may send shares a bit higher in May 2024. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Kroger and Aston Martin

The main advantage of trading using opposite Kroger and Aston Martin positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kroger position performs unexpectedly, Aston Martin can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Aston Martin will offset losses from the drop in Aston Martin's long position.

The idea behind Kroger Company and Aston Martin Lagonda pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.